U.S. Chip Card Saturation Helps Bring Global EMV Growth Nearly to a Standstill

By John Stewart
@DTPaymentNews

Big markets like the United States and China have been boosting EMV chip card shipments for years, but now those two growth engines are sputtering.

Worldwide chip card shipments last year came in at just under 3 billion. At a slim 1%, that was were nearly flat growth from shipments in 2015, according to estimates released Thursday by ABI Research. This follows annual EMV-shipment increases of 20% to 35% between 2012 and 2015, the firm says.

One big factor in the nearly invisible growth last year is what ABI Research calls “overstocking” by issuers in the U.S. market following years of preparation for EMV and the October 2015 liability shift, which according to card-network rules moved responsibility for counterfeit card fraud from issuers to merchants if the merchants were unable to process EMV cards. As a result of this saturation, U.S. EMV shipments fell 19% in 2016, totaling 530 million units.

The situation also bodes ill, at least for the immediate future, for contactless EMV. Currently, most EMV cards in the U.S. market require users to insert the card into a chip reader and leave it there for several seconds while the device interacts with the chip. With their tap-and-go capability, contactless EMV cards would considerably speed up transactions. “Overstocking proved a major barrier in 2016, having an additional knock-on effect on contactless-issuance expectations as issuers first focus on depleting existing contact card stock,” says ABI Research in a news release about its EMV shipment results.

The firm predicts contactless EMV will not emerge in any significant way in the U.S. market until 2018. So far, Citigroup Inc.’s cobranded Visa card portfolio with Costco is the only major program to adopt contactless EMV, according to ABI.

Also contributing to slow growth worldwide is China, where EMV shipments fell 3.9% last year, ABI says. But India is a bright spot for chip card growth, thanks to efforts to boost digital-banking inclusion and a government initiative to take the 500- and 1,000-rupee notes out of circulation.

“Removal of the 500- and 1,000-rupee cash denominations directly led to a cash crisis, and as a direct result, increased demand for point-of-sale terminals and banking access,” says Phil Sealy, senior analyst at ABI Research, in a statement. “A country once so reliant on cash was put into an instant state of shock, but the subsequent reaction will prove a positive one for all involved in the digital-payments market.”

India, one of the last markets to shift to EMV, will now spark “valuable growth” in chip card shipments, Sealy forecasts.